Ross Island Sand & Gravel Co. v. GENERAL INS. CO. OF AMER.

• Decision Date: 19 June 1970
• Docket Number: Civ. No. 68-40.
• Citation: 315 F. Supp. 402
• Parties: ROSS ISLAND SAND & GRAVEL CO., an Oregon corporation, Plaintiff, v. GENERAL INSURANCE COMPANY OF AMERICA, a Washington corporation, Defendant.
• Court: U.S. District Court — District of Oregon

315 F. Supp. 402

ROSS ISLAND SAND & GRAVEL CO., an Oregon corporation, Plaintiff, v. GENERAL INSURANCE COMPANY OF AMERICA, a Washington corporation, Defendant.

Civ. No. 68-40.

United States District Court, D. Oregon.

June 19, 1970.

George L. Kirklin, McColloch, Dezendorf, Spears & Lubersky, Portland, Or., for plaintiff.

Fredric A. Yerke, Jr., King, Miller, Anderson, Nash & Yerke, Portland, Or.; for defendant.

OPINION

SOLOMON, Chief Judge.

Ross Island Sand & Gravel Co. (Ross Island) filed this action to determine whether two claims asserted against it were covered by its insuring agreement with General Insurance Company of America (General). Ross Island also seeks to determine whether General breached its duty to defend Ross Island on the claims. The case was submitted on the agreed facts in the pretrial order.

Ross Island manufactures and supplies readymix concrete. General insures Ross Island under a blanket liability policy.

In August, 1965, Ross Island entered into a contract with Hoffman-Dillingham, the general contractor on the Holladay Park Plaza.¹ The contract required Ross Island to furnish concrete which conformed to specifications set forth in the contract. In December, 1965, Ross Island entered into a similar contract with Beck-Utah, the general contractor for the Calaroga Terrace.²

In July, 1966, Hoffman-Dillingham notified Ross Island that the concrete poured into two floors of the Holladay Park Plaza did not harden within the time specified in the contract. On the same day, Beck-Utah notified Ross Island that the concrete poured into the fourth floor of the Calaroga Terrace also failed to meet contract specifications.

A few months later both Hoffman-Dillingham and Beck-Utah submitted claims to Ross Island for damages resulting from the defective concrete. Both claims included expenses for construction delays. Beck-Utah's claim also included expenses for removing and replacing the defective concrete. Ross Island tendered both claims to General, who rejected them for lack of coverage.

In 1967, Beck-Utah filed an action on its claim against Ross Island in this Court. In 1968, Hoffman-Dillingham filed an action on its claim against Ross Island in the State court. Ross Island tendered the defense of both actions to General, who refused to assume the defense in either case. Ross Island settled the Hoffman-Dillingham action and successfully defended the Beck-Utah action, which is now on appeal to the Ninth Circuit Court of Appeals.

COVERAGE

The insuring agreement between Ross Island and General provides that General will pay "all sums for property damage which Ross Island becomes legally obligated to pay." The agreement also provides that it does not cover:

"(c) property damage:

* * * * * *

(4) to any goods, products or containers thereof manufactured, sold, handled or distributed or premises alienated by the named insured, or work completed by or for the named insured, out of which the occurrence arises;

(d) to damages, because of property damage, due:

* * * * * *

(2) to the loss of use of any such defective goods or products or completed work, or to damages resulting from the loss of use of such defective goods or products or completed work;

(3) to any loss or damage which is caused by improper or inadequate performance, design or specification, or nonsuitability for its intended purpose, of such goods or products or completed work unless there is actual physical damage to other tangible property, other than physical damage caused or necessitated by the repair or replacement of such goods or products or completed work."

The parties agree that exception (c) (4) excludes coverage for the cost of the new concrete which Beck-Utah bought to replace the defective concrete. General contends that (c) (4) also excludes coverage for the labor expenses in removing and replacing the concrete. In addition, General contends that exceptions (d) (2) and (d) (3) exclude coverage for all the expenses claimed.

The cases which have construed provisions similar to (c) (4) uniformly hold that the provisions exclude coverage only for the cost of purchasing a new product. Pittsburgh Plate Glass Co. v. Fidelity & Cas. Co. of New York, 281 F.2d 538 (3rd Cir. 1960); Bundy Tubing Co. v. Royal Indemnity Company, 298 F.2d 151 (6th Cir. 1962); Bowman Steel Corp. v. Lumbermens Mutual Cas. Co., 364 F.2d 246 (3rd Cir. 1966). The provisions do not exclude coverage for the cost of removing and replacing a defective product from a structure into which it has been incorporated.

There are no cases construing provisions similar to (d) (2) and (d) (3). However, the language of these provisions excludes coverage for all the damages here. Exception (d) (2) states that the policy does not cover "damage resulting from the loss of use" of a defective product manufactured by Ross Island. The construction delays alleged by both contractors...